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About 6-Month Loan

There is always a situation during the course of life wherein you are short of money. You need to take help of outside finance and get things going. Savings might not be enough or that must be saved for some other purpose. Financial emergencies are unforeseen, and one needs to know what options can be used in such a situation.

6-months loans are nothing but a short-term personal loan wherein the tenure of the loan is limited to 6 months. There are several lenders who offer personal loans within that tenure for short-term financial emergencies.

This is also known as payday loans which is quite popular in the USA and the United Kingdom. Payday loans help in short-term financing however are quite expensive as well due to high interest rates.

6-Month Loans
6 Month Loans

Features of 6-Month Loans

Short-term finance has gained popularity in the recent years. This is due to the realization of taking a loan to meet the needs instead of spending savings and trying to refill it. Some of the features of short-term finance like 6-month loans are:

  • The borrower can receive the loan amount into their account in less than an hour.
  • This type of loan is paid till the customer’s pay day after which the repayment needs to be made from the monthly salary.
  • 6-month loans require very less paperwork and are quick to be processed.
  • Interest rates are on the higher side.
  • There is an option of applying for this loan online.
  • A good credit history is not a mandatory factor in getting this loan.

Short term finance in India

Short term financing options have not fully blossomed in India. Payday loans are not yet available in India. One can get short term financing through private lenders or from the non-regulated financial lenders society. Loans like payday loans are quite expensive by nature due to high interest rates. In India, it is preferred to give loan to someone who has regular source of income and can provide security for the loan. Banks have a tough task trying to check the background details of the applicant before offering a loan. The case of defaults is high in the country. Hence, it is not practical to offer an unsecured loan for a short-terms as the overall scenario of debts will go up. While people from weaker economic backgrounds should ideally benefits from this type of loan, the risk of defaulting the loan is much too high.

Personal Loans

Personal loans are easily available as a short-term finance. It is an unsecured type of loan and therefore, does not need any collateral. Banks normally do a quick check of the background and the age of the applicant before offering this loan. A personal loan helps in plugging an immediate financial need without taking much burden in repayments. This loan normally has a repayment period ranging between one and five years.

One of the main reasons for the increasing popularity of this loan is the rise in employment rate in urban India as well as higher disposable incomes.

  • Personal loans require minimal documentation as compared to most of the other loans.
  • Most banks offer free personal accident insurance cover with a personal loan and that makes it more attractive.
  • Personal loans are also offered against existing car loans or home loans.
  • Interest rates are high on this type of loan due to the unsecured nature of the loan. The risk is higher in offering such a loan. Typically interest rates hover between 16% to 22% for personal loans.
  • If the applicant has a good credit history and has made timely payments in the past, the banks may offer a more competitive rate of interest.
  • Corporate customers may get personal loans at a lower interest rate as they already have an existing relationship with the bank by way of salary account, special loan products for that corporate etc.
  • A personal loan is repaid in equal monthly instalments (EMIs). This can be done through post dated cheques, electronic payment or through standing instructions with the bank. Some banks offer the option of pre-payment of the loan however, this could attract some charges.
  • When applying for a loan, banks normally levy some processing charges. It ranges from 1% to 2% from bank to bank.
  • Switching loans to better finance the payment is another option made available to the customers today. For example, one can move the loan from one bank to another and through pre-payment close the loan with the first bank. Sometimes with better rate of interest or terms & conditions, this becomes a more sensible option to pay off your loan.

FAQs: 6-Month Loan

1. What is a personal loan?

Personal loan is an unsecured loan that is available very quickly. It can be used for any purpose. It attracts a higher rate of interest than other loans.

2. What is the interest rate on 6-months loans?

The rate of interest on 6-months loans varies from bank to bank and hovers in the region of 16% to 22%.

3. What age group is eligible for a 6-month loan?

Anyone between the ages of 21 and 60 years can apply for a 6-month loan.

4. Are payday loans available in India?

Payday loans are not yet available in India. It exists only in the western countries.

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